The Easy Math of Good Service
I’m very excited to say that I will be leading a Community Forum at this year’s National Arts Marketing Project Conference in November.
In preparation for this, I’m spending some time talking to people in marketing roles in theaters and other arts organizations to see how they think and feel about customer service and its importance. (By the way, this is just as relevant outside of the “arts” part of live entertainment.)
Anyway, a picture has started to form from these conversations, and I want to put forward a simple thought as a starting point: Good service is the best marketing money you’ll ever spend.
Let’s do the math on that. (I hear you groan, “Jim, why always with the math?”)
It would be pretty normal for an organization like the ones going to #NAMPC to spend, say, $20,000 on a marketing campaign. If on average these campaigns got a positive return of 15%, you’d have to be pretty happy with that.
So, if you did all the work that’s required to create a marketing campaign with a cash cost of $20,000, and you got a 15% return, you’d make $23,000 in extra sales from that campaign. Fair enough, but since it costs you $20,000, you can’t really think of it that way. No, you have to think of it as $3,000 of improvement compared to where you were before the campaign. Still, you might be happy with this, and you should be. The campaign worked!
But let’s look at something else. Suppose instead you flood a single performance with smart, upbeat, shiny, happy people whose only goal is to make sure that every visitor is having a great time. Say you bring in 10 of them and pay them $50 for the hour leading up to curtain. That’s $500.
Then suppose you give each of them a $50 budget for things to do to support and help patrons: drink vouchers, upgrade vouchers, venue swag, whatever you can think of totaling another $500. That’s a maximum of $1,000, some of it not even really a hard cost.
What’s that worth?
You’re talking in this case not to strangers who could potentially, but probably won’t, become customers. You’re talking to your customers, including your very best customers and your best prospects for long-term engagement — highly targeted in a way that DoubleClick and Google can’t come close to.
So, what’s the math of this? Let’s say that the typical person you’re going to reach in this scenario is going to buy from you 1.7 times a year, 2.5 tickets each time, at an average price of $75 per ticket, and on average they’re going to keep coming to you for five years.
Their “account” is worth $1,593.75.
You’ll note none of those numbers are very high, but that person is worth half the real value of that entire $20,000 campaign.
If you prevent the loss of just ONE person like this each night, your program is seriously ROI positive. Prevent the loss of a big-time, long-term subscriber, and that number could get close to $10,000.
But forget about preventing loss just for a second. Suppose you take one of the lukewarm buyers we described earlier and made them warmer. They go from 1.7 times a year to three. The simple act of service has increased that person’s value by $900.
And what if your 10 “ambassadors” reach and dazzle eight customers each — 80 touch points on paying customers who are already inclined to like you. Suppose that 5% — just 5 percent — of the people with that experience rave about it to three or four people, and one of those three or four people becomes a “lukewarm” customer.
That’s four new customers worth $1,593.75 each, or $6,375 in new ticket sales, which is more than double the return on your big campaign.
This is the fundamental reality of great service when you really understand the purpose of it, but I wonder if many organizations think this way. If not, we’re going to talk about why not, and dig deeper on whether they should.
I hope to see you there!